FCC Chairman Tom Wheeler promised that the FCC “will consider all of our legal and policy options” in the wake of a ruling, handed down by the Sixth Circuit Court of Appeals, which reverses the FCC’s February 2015 decision to preempt state laws in Tennessee and North Carolina that restrict the expansion of municipal broadband networks in those states.

Adopted by a 3-2 vote along party lines, the FCC order at the heart of Wednesday’s court ruling granted petitions for preemption that had been filed by the Electric Power Board of Chattanooga, Tennessee (EPBC) and the City of Wilson, North Carolina.  Citing Section 706 of the 1996 Telecommunications Act, which directs the FCC to ensure reasonable and timely deployment of advanced telecommunications capability, the FCC preempted geographic restrictions in Tennessee state law that prohibited the ECPB from offering broadband services beyond its electric service area boundary.  With respect to the Wilson petition, the FCC preempted “numerous conditions” imposed by North Carolina that “effectively precluded Wilson from expanding broadband into neighboring counties.”

Claiming that the FCC’s ruling interferes with state sovereignty and exceeds the FCC’s authority, the States of Tennessee and North Carolina petitioned the Sixth Circuit court for reversal.  While admitting that it lacked the power to preempt state laws that forbid deployment of municipal broadband networks, the FCC argued before the three-judge panel that it was fulfilling its Congressional mandate under Section 706 in preempting state laws that restrict expansion of municipal networks that are already in place. Though emphasizing that “we do not question the public benefits that the FCC identifies in permitting municipalities to to expand . . . Internet coverage,” Judge John Rogers wrote that “this preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation.”  Because the FCC premised its preemption authority upon Section 706, which the court found “falls far short of such a clear statement,” the court ultimately agreed with the states in concluding that the FCC exceeded its authority.

Speaking to reporters, Wheeler lamented that the decision “appears to halt the promise of jobs, investment and opportunity that community broadband had provided in Tennessee and North Carolina.”  However, FCC Commissioner Ajit Pai—a dissenter against the FCC’s preemption order—hailed the Sixth Circuit ruling as “a big victory for the rule of law and federalism,” and advised his colleagues to “focus on implementing a broadband deployment agenda to eliminate regulatory barriers that discourage those in the private sector from deploying and upgrading next-generation networks.”  Although House Energy & Commerce Committee Chairman Fred Upton (R-MI) and House Communications & Technology Subcommittee Chairman Greg Walden (R-OR) echoed Pai in describing the ruling as “a wake-up call for the Commission to heed the limits of its authority,” an official of the National Association of Telecommunications Officers and Advisors maintained:  “when private industry fails to step up to the plate and provide Internet services that will enable our communities to thrive . . . local governments should have every option available to right this wrong.”